No. of Recommendations: 11
My initial impression is that her portfolio is much too aggressive, with about 85% in stocks. It is more of a "get-rich" portfolio than a "stay-rich" portfolio. Considering her age and the market being so richly valued, I'm not so sure that she needs much exposure to stocks.
1) Does she need money from the portfolio? Anything more than a small amount?
2) Is her portfolio invested for herself or for her heirs? I would submit that at any age above about 80, a person is basically investing for the people (and charities) who will inherit.
At 90 years old, she is not in the "stay-anything" category.
The life expectancy of a 90-year-old woman is approximately 4 to 5 more years.
You didn't even hint at the size of her portfolio. Reading between the lines, she doesn't need much of any ff the equities to live on, her SS, pension, etc. plus maybe the other 15% gives her all the income she needs.
How long would her portfolio last before it runs out if she withdrew her needed amount from the 15% that isn't in equities? I bet it's a lot more that 4-5 years. How long for withdrawals from the 100% if the equities lost 50% and stayed there?
When we were discussing retirement my wife said, "If we have a million dollars and put it all into a savings account, we could take out $50,000 a year for 20 years, right?" (Actually, wrong. At 3% APR it would last 30 years.)
Do that math and see where she stands.
Roughly half her portfolio is in a traditional IRA, where capital gains aren't a factor.
Which means that the other half is in a taxable account, right? Her heirs will get those equities at a stepped-up basis. chef's kiss.
If it were my portfolio I might have the IRA in TIPS.
Ugh. She is not going to be living through much inflation in 4-5 years, so what's the point?
TIPS rates today are approximately 1.80% for a 10-year TIPS
Putting a 90 year old in TIPS today is financial malpractice.
If you insist, put it in SGOV instead. 4.35% yield. Or SPAXX or FLRN etc.
An IRA should be invested in equities.
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So the question is what should a nonagenarian, whose main goal is preservation of capital, be invested in?
Hah! I learned a new word today. "nonagenarian" Cool.
Why is her main goal preservation of capital? What's the point?
I would think that a nonagenarian's investment goal should be preservation of income. She is not going to live long enough for the capital to go much of anywhere.
She really needs to consider the lifetime of the PORTFOLIO and not of the lifetime of HERSELF. The portfolo has a longer remaining lifetime than she does. The next few years in her hands, and possibly decades in the hand of her heirs.
I would do some mentally accounting. The cash/fixed-income portion (15%) of the account is for me. The equity portion (85%) is for my heirs....and for me if I'm still alive in 10 years.
Adjust the asset allocation accordingly. The equities shouldn't be in individual stocks, should be in a whole market fund like SPY or VTI.
